No Fooling Here! US Retains Title for Highest Corporate Tax Rate in the World
April 1, 2014
Today (April 1) is the day to take a minute and have a laugh or two and engage in some harmless practical joking with friends and colleagues. Unfortunately, today is also a day that for the last two years has been anything but a joke for consumers and businesses. Back in 2012, on April 1, Japan lowered their own corporate tax rate to 36.8 percent, down from 39.8 percent. The rate decrease left the “United States with the highest effective rate among developed countries: 39.2 percent.” The Taxpayers Protection Alliance (TPA) has been an ardent supporter when it comes to comprehensive tax reform, especially when it comes to reforming the corporate tax. There should be absolutely zero desire among anyone who cares about the growth of the US economy to retain the dubious distinction of ‘worlds highest effective corporate tax rate’ for even just another day, let alone another year.
Last year, there was steady movement toward tax reform and the work done by former Senate Finance Chairman Max Baucus (D-Mont.) and current House Ways and Means Chairman Rep. Dave Camp (R-Mich.) to educate the public on solutions for tax reform was extremely important. That work paid off earlier this year when Congressman Camp released his tax reform plan that combined many ideas into a comprehensive solutions-based blueprint for overhauling the US tax code. While the plan wasn’t perfect, the proposed changes to the corporate tax were laudable goals deserving of praise. The plan lowers the corporate tax rate to 25 percent; a type of rate reduction that would bring us down from the number one slot we currently hold for highest effective corporate tax rate in the world to be competitive with the rest of the world. This would be a major victory for businesses and consumers nationwide due to the impact that corporate tax has on employers everyday. A study released in 2013 showed that U.S. GDP will be between 1.2 percent and 2.0 percent smaller in 2013 because of our 35% statutory tax rate. Additionally, workers will likely suffer a depression in wage growth by between .1% and .3%. Long-term, wages may be depressed by as much as 1.2% because of the statutory corporate rate.
The economic concern is not only pressing because of the domestic impact, there are also the consequences that come from an international perspective in having the highest effective corporate tax rate in the world. Foreign nations are deterred from investing in the US while at the same time encouraging companies located here to relocate. Beginning in 2000, during an 11-year period the U.S. lost a net of 46 Fortune Global 500 company headquarters to other, lower-tax countries in both Europe and Asia.
Lowering the corporate tax should be a top priority for politicians and policymakers alike on both sides of the aisle who are looking for ways to help get a stagnant economy moving once again. States are acting on corporate tax reform on their own and not waiting for Washington D.C. to act. After two years of sitting at the top with a corporate tax rate higher than everyone else in the world, it is time that Congress and the White House come to together to reduce the corporate tax rate and make it easier and more beneficial for taxpayers, consumers, and businesses to invest in America and get this economy back on the right track. It is no joke that Congress and the White House need to act now to lower the corporate tax rate.